Karachi: Analysts at Arif Habib Limited have forecasted a positive trajectory for the stocks in the upcoming week, driven by expectations surrounding the Financial Action Task Force (FATF) decision regarding Pakistan’s anticipated exit from the grey list.
Amidst ongoing result announcements, specific sectors and stocks are anticipated to garner attention due to the anticipation of robust financial performances.
The benchmark KSE-100 index of the Pakistan Stock Exchange (PSX) currently trades at a price-to-earnings ratio (PER) of 4.1x (2023), significantly lower than the Asia Pacific regional average of 12.0x. Additionally, the index offers an attractive dividend yield of 9.8 percent, compared to the regional average of 3.0 percent.
The market began the week on a positive note as investors anticipated that the policy rate would remain unchanged at 15 percent. However, sentiment soured following Moody’s downgrade of ratings for five commercial banks in Pakistan, with a negative outlook maintained.
Furthermore, remittances experienced a year-on-year decline of 12 percent in September 2022. Additionally, the Pakistani Rupee, which had appreciated against the US dollar over the past two weeks, reversed its trend and closed the week at PKR 218.43, marking an increase of PKR 1.49 (0.7 percent) week-on-week.
State Bank of Pakistan (SBP) reserves dwindled by $303 million, reaching a three-year low of $7.6 billion. Automobile sales plummeted by 51 percent year-on-year, hitting a 27-month low.
However, a decrease in government bond yields post-monetary policy and expectations of flood relief support from international financial institutions helped cushion the overall decline. The market closed at 41,949 points, shedding 137 points (0.3 percent) week-on-week.
Sector-wise negative contributions were observed from Technology & Communication (117 points), Commercial Banks (48 points), Tobacco (32 points), Cement (15 points), and Engineering (12 points). Conversely, positive contributions came from Exploration & Production (46 points) and Refinery (22 points).
Among individual stocks, negative contributions were made by TRG (207 points), PAKT (32 points), MEBL (24 points), EFERT (19 points), and ENGRO (18 points). Conversely, positive contributions were witnessed from SYS (83 points), POL (20 points), LOTCHEM (17 points), OGDC (16 points), and NESTLE (15 points).
Foreign investors continued to be net buyers during the week, with a net inflow of $12.3 million compared to $4.7 million the previous week. The majority of buying activity was observed in the Technology ($12.4 million), Power ($0.8 million), and Cement ($0.3 million) sectors.
On the domestic front, selling was reported by Broker Proprietary Trading ($4.8 million) and Companies ($4.0 million).
Average trading volumes stood at 267 million shares, down by 39 percent week-on-week, while the average value traded settled at $44 million, marking a 7 percent decline week-on-week.
As investors await the FATF decision and navigate market dynamics, cautious optimism prevails, with expectations of continued volatility in the days ahead.
